Key takeaways
- The statutory interest rate is the Bank of England base rate plus 8% a year, recalculated with the base rate set in late March.
- A fixed compensation amount applies based on the size of the debt if no interest was paid — up to £180 for debts over £10,000.
- You can also claim reasonable recovery costs for collecting the debt.
- Most UK small businesses waive interest on late invoices — the real win is a crisp due date, clear terms and a polite chase.
- If you charge interest, say so in your terms and on the invoice so the client can see it coming.
The statutory rate in 2026
When a business debt is paid late, the Late Payment of Commercial Debts (Interest) Act allows you to charge statutory interest. The rate is the Bank of England base rate plus 8% per year. HMRC recalculates it on the base rate set in, roughly, the last quarter before the payment date, so the figure on your invoice needs to match the exact period.
When it applies
Statutory interest is available when a payment date has passed. That date is usually what your invoice says (for example “due in 14 days”), or where no date is stated, the default is often 30 days after the customer receives the invoice or the goods or services. If the client gave you a purchase order, the clock runs from whenever the sum is due under your agreed terms — it pays to make the due date obvious.
Late payment compensation
On top of the interest, the Act gives a fixed compensation sum once a debt is late and interest has not been paid. The amount scales with the debt:
- Up to £999.99 — £40.
- £1,000 to £9,999.99 — £70.
- £10,000 or more — £180.
You can also claim reasonable costs you actually incurred collecting the debt — for example, a debt collector's fee. The compensation amount is a fixed right per late invoice, not per customer, so it is worth understanding before you decide whether to chase hard.
How the interest is calculated
Statutory interest is a running daily figure from the day after the payment date until the day before you are paid. The daily amount is (debt × rate) ÷ 365. For example, a £5,000 invoice at a rate of 8.5% (£3.50% base rate + 8 percentage points) is about £1.16 per day of lateness. Small enough to feel pointless on a single invoice, but it escalates quickly when you add the fixed compensation and recovery costs.
The wording that keeps clients onside
If you plan to charge interest, the professional approach is to be transparent: put the due date and a phrase like “Payment is due by [date]. Late payment on this invoice is subject to statutory interest at the Bank of England base rate plus 8% a year under the Late Payment of Commercial Debts (Interest) Act 1998” in your terms and on the invoice itself. A client who can see the interest before they are even late is far more likely to pay on time than one who discovers it after.
Start with a friendly payment reminder that treats it as an oversight before any mention of interest. The polite escalation, then a second reminder, then a final notice, is the sequence that gets most invoices paid without interest ever needing to appear.
Should you actually charge it?
Most small UK businesses never charge interest, for a simple reason: the amount on a typical invoice is small, the relationship is ongoing, and a client who pays the original bill a month late usually stays a customer longer if the chase stays polite. Charging interest is a lever that is most effective when it is visible in your terms from the start and used sparingly — not discovered as an afterthought on an overdue bill. Use reminders, clear due dates and good terms first, and save the interest for the clients who genuinely leave you hanging.
Chase without making it weird
Professionally worded payment reminder emails that escalate politely — a template you can send before the invoice is ever late.
Frequently asked questions
What is the statutory interest rate on late invoices in the UK?
The Bank of England base rate plus 8% a year. HMRC recalculates it with the base rate in force when the payment became due, so the rate on your invoice should match the exact period.
Do I automatically get interest on a late invoice?
Not automatically — you claim it. Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim interest, plus a fixed compensation sum and reasonable recovery costs once the debt is late.
When does late payment interest start?
The day after the payment date passes. If no date is stated, it usually runs from 30 days after the customer receives the invoice or the supply.
Can I waive interest on a late invoice?
Yes. Most small UK businesses waive it to protect the relationship. Interest is chargeable but usually small, and worth more as a term in your agreement than as a charge you actually impose.
Can I claim interest on invoices to individuals?
The Late Payment of Commercial Debts (Interest) Act is designed for business-to-business debts. For consumers, consumer-credit rules apply instead, so the interest route is mainly useful with business clients.
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General guidance only — not legal, tax or accounting advice. Rules and rates can change; check HMRC's current guidance for the latest. Last reviewed 8 October 2026.